Kathmandu-Huawei’s 4G misconduct saddles Nepal Telecom with millions in losses and declining service quality, while political influence pushes to award them the billing contract.

The 4G project, with a total cost of Rs 19 billion, failed to meet the agreed-upon work standards. Service quality declined, and Nepal Telecom continued to pay mandatory regulatory fees while incurring losses and providing minimal benefits to consumers.

The project’s controversy began from the tender stage. Misconduct by Huawei, the primary supplier, compromised network quality. A crucial component, valued at approximately Rs 1 billion, was never installed.

Huawei’s failure to install small cells, essential for enhancing 4G and 5G speeds, further exacerbated the situation. Although included in the contract, the equipment was not deployed, leaving Nepal Telecom with phased-out WiMAX spectrum and incurring annual fees exceeding Rs 100 million.

For three years, the company paid frequency charges without any tangible utility, further adding to its losses.

The primary lapses occurred under the management of China Communications Services Corporation Limited (CCSI), whose parent company is Huawei. The contract stipulated the installation of 6,000 small cells worth approximately Rs 700 million.

However, the work remains incomplete, and poor coverage persists in underground areas and lower floors near large towers. Telecom has now decided not to install small cells.

The agreement required the installation of small cells after completing the core 4G infrastructure, based on coverage studies. These studies indicated a need for around 6,000 units. Within the Rs 19 billion budget, Telecom agreed to construct 640 BTS towers and install approximately 6,000 small cells.

Given the missed deadlines, Telecom should have claimed damages and blacklisted Huawei under the Public Procurement Act. The penalty would have amounted to Rs 600,000 per day over the past three years. Regrettably, no such process was initiated.

Managing Director Sangita Pahadi and Acting Managing Director Sabina Maskey opted not to seek clearance or blacklisting for Huawei.

Instead, they proceeded to assign the billing contract to Huawei. This decision garnered political support from then Prime Minister KP Sharma Oli and Communications Minister Prithvi Subba Gurung.

Telecom canceled the initial tender and subsequently issued a revised tender specifically designed for Huawei. The current stage of the process is nearing completion.

If Huawei is granted the billing contract, it would gain control over crucial Telecom technologies. Courts, regulators, and consultants have expressed concerns that this move is strategically unsound.

The Commission for the Investigation of Abuse of Authority (CIAA) is investigating the case. Additionally, the commission is examining the procurement of antennas in light of complaints regarding unjustified cost escalation.

Nepal Telecom commenced the launch of 4G services in Pokhara and the Kathmandu Valley on December 17, 2016. Nationwide expansion commenced two years later.

Under the leadership of Managing Director Kamini Rajbhandari, Telecom prepared project specifications. During the evaluation of global tenders, a complaint alleging financial irregularities was filed with the commission.

In November 2018, the commission cleared the case. Subsequently, Telecom awarded a substantial Rs 19 billion contract. Hong Kong-based CCSI was entrusted with the radio access network work, while China’s ZTE secured the core network contract.

ZTE successfully completed approximately Rs 2 billion worth of work within the stipulated timeframe. However, Huawei’s CCSI managed to handle about Rs 17 billion but made slow progress, leading to delays in infrastructure development.

These delays were attributed to the COVID-19 pandemic, which occurred late in the project. Furthermore, the quality standards set for the contract were not met.

The contract required equipment sourced from various countries, including the United States, Canada, Europe, Finland, and Australia. Huawei, citing unavailability of equipment from the United States and Europe, opted to install Chinese antennas.

The CIAA is currently investigating the installation of equipment that deviated from the contract specifications.